THE GAME HAS CHANGED, THE RULES HAVE NOT
JUNE GLOOM
In late June, the California legislature passed a trailer bill to the ’12-13 budget that
epitomizes the haplessness of the CSU. The budget itself warns that if the people do not
vote for the Governor’s tax increase in November, then $250,000,000—roughly 12% of the
state’s share of the system’s general fund—would be cut.
Now, for the good, I mean bad, no, I mean . . . . ugh, news.
The trailer bill woos voters by rolling back ’12-13 fees to their level in ’11-12, if Brown’s
measure passes. This provision wipes out a 9%, $132,000,000, fee increase for ’12-13. The
bill does supplement the CSU with a smaller outlay of $125,000,000 in ’13-14.
Except in Sacramento, November follows August and September when students complete
registration. Therefore, if the measure passes muster, staff may need to process hundreds
of thousands of fee refunds and grant over-payments.
Good thing we use PeopleSoft; else, this could take a lot of time.
Politically, CSU faces hard choices. Support the ballot measure with the trailer bill, and
gamble that in ’13-14 the legislature allows the CSU to restore the ’11-12 fees and collect
the $125,000,000. Or endorse a permanent rollback of $250,000,000 while keeping the
option to raise fees, which the Solons of Sacramento will seek to squelch.
SOLONS OF SACRAMENTO
The state’s political leaders refuse to acknowledge any link between cutting support to the
general fund and raising fees. Rather, they blame such increases on lasagna bashes at the
Chancellor’s
residence and
excessive cell
phone use by
executives in
campus housing.
And they refuse to
acknowledge that
as long as they
forge a budget
with inflated
revenue
projections and
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exaggerated savings, they discourage long-term change.
Such strategic thinking—a toxic mix of pandering, intellectual dishonesty, and
gutlessness—brings us to the current choice.
In effect, we postpone thinking differently by affecting to believe every year that state
revenue will return as it once was next year. But revenue still is nearly 15% below its peak
in ’07-08. That peak, of course, was as make-believe as the Disney Matterhorn because
inflated real estate values and, ah, esoteric financing mimicked the production of real
wealth.
Today persistently high unemployment and consistently low income growth do not indicate
that the economy is ready to regain its peak. We should not count on steady economic
growth to support the general fund. The contrary assumption underwrote free tuition in
the Master Plan. Nor should we count on California reining in expenditures elsewhere from
the general fund in order to increase substantially the 7-8% share for UC and CSU.
GET REAL
Given all this, advocates of an affordable and accessible CSU seem to have two options for
keeping fees low while the state removes between $100,000,000 and $500,000,000 each year
from the general fund. (@ $2,000,000,000 from the state remains in the general fund.) They
can follow the tortuous processes for new tax revenue, and/or they can suppress cost.
From ’08-12, CSU lost nearly $1,000,000,000 in state funding; fees almost doubled. If ’1216 play out similarly, CSU would have to cut 25% of cost to avoid a 50% increase in fees.
Since we must scramble to get the electorate to approve measures that wipe out a
$250,000,000 cut, it is folly to bank on a bigger bail-out.
There is a third way to manage fees as a response to budget cuts as large as $1,000,000,000.
However, we must think differently.
We have to check our assumptions. We seem to assume that CSU undergraduates pay the
average published fee of $6,800 for at least each of four years: $27,200. And we assume that
we can hold the published price constant, absorb large cuts, and not prolong the time to
degree. But over 50% of our undergraduates get half their credits in the community
colleges for a public price of $1,200 each year. As a result, they can pay $16,000 for a fouryear BA. Together, these two paths to the BA yield an average price of $22,270, rivaling the
cost of a degree through low-tuition stars like BYU Idaho and Western Governors’
University.
But wait, there is more, I mean, less!
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Even this approach grossly overstates the average cost of a degree. Grants and discounts
cover the entire fees for at least 50% of the students in the community colleges and CSU,
and they dent cost for another 25%. This means that the average degree cost across these
two major paths to the BA is closer to $11,360 for four years than $27,200.
Does it still make sense to resist fee increases so adamantly?
Back in 2000, well before the graduation initiative cleared the underbrush that delayed
progress to degree, students on average took two less credits each term and graduated at a
16% lower rate than they do today. It is hard to imagine how a $1,000,000,000 cut would
not jeopardize the support that has made these gains possible. Reverse them, and add
another year of cost to a degree, $6,800 for a student. Meanwhile, the state wins a dubious
victory. Its funding per student decreases, but its ratio of cost per graduate increases. Such
is the result of making a fetish out of list price.
OFFSETS
I am implying, of course, that we can and should raise fees. Nationally, comparable,
similarly sized universities today average $10,800 without offsets as large as those in
California; we should aim for $10,200 in four years, trading against the state’s withdrawal
of $1,000,000,000. Examples of how to offset such a fee increase include:
1. Really getting behind the 2+2 transfer programs with the community colleges,
where fees still are the lowest in the nation and unlikely to rise even to 20% of the
charge in the CSU. Success, though, requires the two-year colleges to prioritize the
BA track; and CSUs must publicize this pathway as worthy and cost-effective.
2. Change remedial course work from non-baccalaureate to baccalaureate credit. 57%
of students need remediation; 27% must be treated in both math and English. This
group effectively pays for a year of instruction before beginning to pay for 120
baccalaureate credits. Probably, the remaining students in need of remediation pay
for the equivalent of an added term. Incorporation into 120 credits likely will
displace electives. It also recognizes that such widespread need for remediation has
less to do with individual failure to learn and more to do with the gap in
expectations about learning achievement between our public schools and
universities. This change lowers the cost of a degree for roughly a third of the
students who begin as freshmen in the CSU. On average freshmen would save
$2,500.
3. Reconsider the extent to which CSU discounts fees. The CSU foregoes one-third of
its fees, over $750,000,000, through the state university grant program. This is one
of the highest rates among public universities. Indeed, the combined student grants
and discounts in the community colleges and CSU exceed the combined fees. So
there is margin to play. Consider this. Instead of raising fees 50%, $3,400, to
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$10,200, lower the discount and thereby buy down a fee increase. A 50% decrease in
discount balances a 16% reduction in fees; $10,200 shrinks to $8,500. In a sense,
everyone gets some discount.
4. Allow students to transfer in up to four courses that are free and online, from
accredited and unaccredited sources, provided that CSU faculty pre-approve the
course. Faculty with ties to distinguished programs are posting free content in
formats that allow for self-testing and a final grade/ranking. One can imagine many
ways to authenticate students’ experience of such a course and to assess their
learning. Obviously, students save by paying for fewer courses, and the CSU gets to
re-allocate some capacity to new students or higher credit load for continuing
students.
CUTS: THE FOR-PROFIT SOLUTION
Fees and offsets are only one way to go. We also can look at economies and new revenue.
But we must temper our expectations. On the one hand,
COST/FTE
18,406
14,039
CSU has held down cost by growing enrollment and
<8,000 FTE >20,000 FTE
minimizing residential and research expenses, in an
administrative structure with relatively fixed costs. On the other hand, a large part of
excess cost, $200,000,000, derives from a political mandate not to shutter small campuses
with similar structures and fixed costs. These two tendencies leave little room for more
shaving. As for growing non-general funds, most CSUs lack the research infrastructures,
sporting facilities, and residential experience that help to underwrite large efforts. The
Master Plan excluded these features from the CSU.
Complicating matters is that cost control has become a creature of ideology and
vindictiveness. A driving assumption is that the current modality of face-to-face instruction
is inefficient; therefore, we need to adopt the for-profit model of a centrally prepared
curriculum that is delivered by part-time faculty in a no-frills or online format. Even if this
assumption was indisputable, it still would apply to only direct instruction; and that is a
fraction of cost in a university. A mouse cannot swallow an elephant.
Also, cohorting and technology-based learning can reduce near-term costs, like fees for
students and pay for faculty; but they seem to hardwire in long-term costs in the for-profits
that are devastating. Low credit loads increase time to degree and hence cost. Meanwhile
technology trades the cost of permanent faculty for the permanent disruption of new
solutions, upgrades, and updates.
SYNERGY
The CSU has no analytical method, benchmarking, and plan for undertaking the reduction
of non-instructional costs. Thus, discussion degenerates quickly into an exchange of hit
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lists. Get rid of sports. No, administrators. No, no, the French program must go! Wait, I
meant the canine unit.
However, it has become the fashion in CSU management to speak supportively, if vaguely
about synergies, the delivery of services and functions across campuses in order to achieve
consistency and savings. The instances so far mainly involve a campus sharing, for a fee,
technical counsel and leadership. In theory, synergy can wring duplication out of a twentythree campus system. In practice, though, the approach raises the ire of people who swear
by local implementation of local governance. It requires collaboration with unions on the
consolidation of positions and phasing from old to new. By reverting annually to the
insistence—it is not a strategy—that the state owes us, we delay the urgency necessary to
prime the culture for such change and to spur ourselves to develop methods and schedules.
If steep cuts are still in store, and if we cannot raise fees and overcome our paralysis before
synergy, then we will drop into the death spiral of lay-offs, lower enrollment, lower
revenue; still more lay-offs, more enrollment cuts, more lost revenue . . .
A reasonable approach to fee increases, balanced by offsets, makes the level of cuts that the
system must absorb manageable.
Over time, we can phase in an
increase of 3 in the student to
faculty ratio, as well as similar
adjustments in related staffing.
This could net north of
$230,000,000. We have enough
knowledge of technologies like
lecture capture, formats like
self-paced and asynchronous,
and teaching strategies like
recursiveness and frequent
feedback to expand instruction
beyond the fixed time, location
and capacity of a classroom.
We must identify projects, goals, schedules for meaningful synergies that total at least
$200,000,000 in savings. Such consolidations should be invisible to students, customers and
clients on the twenty-three campuses. Candidates include collection management across the
libraries, transfer articulation, non-academic payroll, online storage and learning
management systems, bulk and cyclical purchases, digital security and disaster recovery,
and benefits and employee assistance.
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Still, outright cuts should be a last resort. They are symptomatic of a bureaucratic elite
that, consciously or not, has a vested interest in seeing state funding as the only game; they
are a powerful broker in this game with the capitol. Growth, in the face of state
withdrawal, is discouraged; it will encourage more cuts by the state, as if cuts otherwise
might not occur. Actually growth beyond the number of students that the state funds now
is covered by fees. Indeed, it produces a margin for other uses.
The problem, therefore, is more conceptual than financial. The game has changed, the
rules have not. The state used to be Big Daddy. He allocated reliably, sufficiently,
specifically—permanently, we imagined. Not so. Now, it is about fees and enterprise funds.
We need to hire permanently, give raises, and aggregate different funding sources to
achieve large projects. But the rules say not with non-recurring funds, and not across
auxiliaries and the university proper.
It is a brave, new world, alas. And CSU is a cowardly lion.
Harry Hellenbrand
Provost and Vice President for Academic Affairs
July 18, 2012
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